Advising Purpose-Driven Organizations
Purpose-driven organizations have legal challenges distinct from either traditional for-profit or non-profit organizations.
Defining a purpose-driven organization
Purpose-driven organizations combine (i) economic viability and sustainability with (ii) a specific organizational mission and (iii) a unique set of organizational values and promises, with equal priority placed on all three components. Evolving past the traditional “non-profit” and “for-profit” divide, purpose-driven organizations seek economic viability in a marketplace while also simultaneously accomplishing a mission and spreading socially positive values.
Answering “why,” “how,” and “where”
Most organizations, whether for-profit or non-profit, focus their organizational mission on “why” they exist, which is typically understood as providing a particular product or service. In addition to answering “why,” a purpose-driven organization will answer “how” the organization will solve a problem (and actions it will not take in attempting to solve the problem), and “where” the organization wants to take its stakeholders and the public more generally into the future. Answering the “how” and the “where”—questions related to an organization's means and ends—incorporates the organization’s mission and values into its day-to-day operations.
Specific legal needs of purpose-driven organizations
Governance and corporate form can be particular challenges for purpose-driven organizations. While many purpose-driven organizations operate as traditional C-Corporations, specific corporate forms such as the public benefit organization can also be utilized to codify purpose as a matter of binding corporate law. Hybrid models, which might include organizing a related 501(c)(3) public charity or foundation, or even a public advocacy 501(c)(4) vehicle, can also be adopted to meet purpose-driven needs.
Keeping the company accountable to its mission and values involves a holistic and dynamic process of aligning an organization’s internal and external agreements and incentives. Internally, language can be added to the company’s organizational documents, including its charter, bylaws, or corporate manifesto. Externally, covenants can be added to shareholder agreements, employee and service provider agreements and manuals, and in other third-party contracts.
Purpose-driven boards often adopt enhanced oversight and advisory mechanisms. Specific C-suite roles can help implement and monitor the company’s mission and purpose, including through the appointment of officers specializing in ethics, human rights, DEI, or ESG. Inhouse or outside legal counsel with these or similar expertise may also be engaged to advise purpose-driven organizations in relevant areas.